How To Position Yourself For Trading Success

It looked like it would keep going up, but the price action soon stalled and headed to the downside. It was on the NQ E-mini and Martha had placed a market order as an extended candle on the 30-minute chart had blasted off and had continued to go upward. Martha had been trading for several months and believed that the day trading seminars she had taken had provided enough of an education in the markets to prepare her for live trading. “How hard could it be?” she had said to herself after completing the course. She made a plan and made sure that she had a few rules. Additionally, Martha thought that the brief instruction in the discipline of trading was more than enough because, as she put it, “I have that part handled.” There had been a number of her colleagues that had made a few ventures into the markets and she had commented to herself, “Hadn’t they done well?” It didn’t matter to her that when she spoke with her friends even they had admitted that they really did not have a plan and simply “went with the crowd.” Martha was not fazed by that admission and barreled forward with an unbridled confidence that she would prevail. However, this confidence was not based upon a foundation of competence and was established before she had a string of losses. Therefore this latest turn in the price action left her feeling confused, frustrated, fragmented and frazzled. She couldn’t figure out what was going wrong. This stuff was supposed to be easy…wasn’t that what the seminar had intimated? Unfortunately, Martha not only lost in that NQ trade, she proceeded to lose consistently for several weeks that ended in a blown account. She blamed her failure on the seminar, the market news channels, her friends and anyone or anything else that came to mind…that is, anything else but her.

The bottom line is that Martha had not “positioned” herself for trading success. Yes, she took a course and had studied her material ardently; however what she failed to take into account was that success in any important and valuable endeavor requires more than just a few classes, it requires both an educational foundation and a mindset that is supportive to the task at hand. Trading, as anyone who has traded for any length of time will come to know, is arguably the single most challenging venture on the planet. The reason for this is simply that trading is the only endeavor where if you are in an active trade you are gaining or losing money with every movement of the tick. Money is an extremely powerful stimulant in our society and from the early years of childhood we are taught that capital is directly associated with power and influence. Additionally, money becomes a part of personal identity and people who have it tend to feel a higher self-esteem than those who don’t. Trading requires both mechanical data expertise (the ability to analyze and process market order flow, price action, indicators and economic reports while planning and executing according to rule-based strategies) and internal data expertise (the ability to manage thoughts, emotions and behavior) which are the precursors to getting any result. The internal data, or your mindset and attitude, are crucial to your ability to see the mechanical data without distortion which often leads to erroneous interpretations and a lack of effective follow-through.

So, Martha had set herself up for failure. Her educational foundations were flimsy to begin with and she did not recognize that participating in the markets is almost exclusively mental and emotional as you negotiate mechanical and internal data. Actually, without a mindset that holds oneself accountable for all results, that focuses on skill-building and process mastery as foundational principles and that maintains commitment as sacrosanct, any level of success will be almost entirely illusive. This is positioning yourself for success. To position yourself for success it is important to recognize that skill-building and process mastery are where true “competence” is developed. Confidence that is not based in competence is only hubris, and promotes delusions that defy reality. Actually, skill-building can be demonstrated as an equation; P + EF + FL + H = Skill. P is for protocols (strategies, rules, procedures and set-ups that include both mechanical and internal data). Protocols are established sequential steps that will drive you to the goal. Added to protocols are EF, effective routines. Effective routines are the prioritized lists of behaviors that execute the protocol which with repetition will become a habit, and that neutralize behavior as a variable. It is important to have consistent behavior in order to safeguard against erratic and irresponsible conduct. Next add FL, feedback loop. The feedback loop is where the protocols and effective routines are measured, verified and documented. Any endeavor that you want to become proficient in must be measured. H stands for habituation. Habituation of the protocols, effective routines and the feedback loop is essential to instilling mastery into this process. Once you have done that you have developed a level of skill. However, it is important to remember that development of skill is an ongoing progression.

One of the definitions of trading is that it is a journey in self-discovery. As you trade in a self-aware state, you will learn more about yourself and become aware of the issues that stem from limiting beliefs about money, the market, and your relationship to them. Having a mindset that holds you accountable for all results necessarily means that you are prone to identify improvables early and often; and as well you are establishing the first steps to ensuring your position on the pathway to using the information and data in efficient ways. Your success, that is trading with your best and in the interests of your best, depends upon this positioning.

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Andreas Stockmann
London, United Kingdom

You really do great technical analysis research. Very impressive, you know your job. Over the years, I have read so much technical analysis from many authors, and you can really tell their personal bias is affecting what they see in the charts. You do great work, very impressive.

Ludwig Roessler
Kelowna, Canada

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